Episode 7: Summer, Salary, and Statutes - Breaking Down Norwegian Holiday Regulations

Ever felt lost in the world of Norwegian holiday and holiday pay? You're not alone! 

Lawyer Lill Egeland is your guide, explaining:

• Minimum vacation days (hint: it's more than you might think!)
• The difference between salary and holiday pay
• How the mysterious "June payment" works
• Scheduling your vacation time ️

Transcript

[00:00:07] Lill: Hi and welcome to a new episode of Norwegian Employment Law in 10 minutes. My name is Lill Egeland. I am a lawyer in the law firm Simonsen Vogt Wiig and today's episode is about Norwegian holiday and holiday pay. Now that's a complicated and scary topic if you're a Norwegian person. It's even more complicated and perhaps scary and confusing if you are a non Norwegian person.

[00:00:29] So let's try to find a bird's perspective on this topic. First of all. Let's start with the legal aspect. The law is governed by the Holiday Act, and that's a law that you can find available in English, Not publicly though, but if you shoot me an email, I'll simply send it to you so you can find the details of that law.

[00:00:54] The Norwegian holiday law says that all employees in Norway are entitled to four weeks and one day holiday each calendar year. So that's the minimum requirements of Norwegian law. The most common holiday in Norway, however, it's a more contractual obligation, is five weeks. So most employees in Norway have a five week holiday.

[00:01:18] Under Norwegian law, the payment of holiday is what perhaps causes the most confusion. In other countries, it's common to either have a prorata build up of salary during holiday, or you get just a normal salary whenever you have time off. This is not the case in Norway. 

[00:01:37] In Norway, employees are not paid their salary when they go on holiday. So the employer stops the salary during holiday. Now, in order to make this simple, Norwegian employers do not comply with the system of the Norwegian Holiday Act. What Norwegian employers do instead is to choose the month of June or July. to stop their salary payments. So during these months, the employees do not receive salary.

[00:02:04] However, they receive what is called holiday pay. And what is holiday pay? Holiday pay is an accrual that the employer makes based on last year's salary. And under the law, this accrual is 10. 2 percent of the salary from last year. So say you have an employee with a, with an annual salary of 700, 000 NOK, and that's the payment you've made to the employee during last year's around 700, 000 NOK.

[00:02:34] Then, as an employer, you pay 10. 2 percent of that into a bank account, if you put that simply. And then, in 2024, when June comes, and you are not paying any salary. Instead, you're paying out these 10. 2 percent of what the employee earned the last year. The 10. 2%, that applies if you offer your employees four weeks and one day, which I explained is the minimum under Norwegian law.

[00:03:00] That's the Holiday Act system. If you offer your employees five weeks holiday, then you have 12 percent holiday pay. So in the month of June, for instance, you pay 12 percent of whatever income the employee had the last year. To complicate it even further, if you have, even if you have four weeks and one day holiday, or if you have five weeks holiday, and then during the month of June, you do not pay salary.

[00:03:30] The problem is that there are more days than four weeks and one day, or five weeks in the month of June, because it's basically just four weeks in one month. So in addition to not paying salary, you are actually also making deductions in the holiday pay, because basically, simply put, if you have five weeks holiday, there are five weeks during the year that you are not supposed to receive your salary.

[00:03:58] So in order to make that happen, the employer deducts. basically almost a week worth of salary during that month of June. Now, fear not. Usually, or always really, this is handled by your pay department. And if you don't have a pay salary department, this is handled by your accountant, the salary payment firm.

[00:04:22] But the purpose of this obviously would be for you to understand it somewhat more why, all these deductions are made and what the system really is. That's the concept of number of days. That's four weeks and one day, or five weeks. It's the concept of how holiday is paid. Not during a payment of salary, but during the payment of a holiday pay.

[00:04:45] And then obviously there are some details in terms of when the employee can take out their holiday. I can put it on a very high level saying to you that employees in Norway need to have a three week continuous period of holiday. During what is called the main holiday period, which runs from the 1st of June to the 30th of September.

[00:05:06] Basically, there is sun in Norway only during the summer, so we need to give them some light, and then they have three weeks, continuous holiday. The rest of the holiday, can be taken in other times of the year. And it is you as an employer who decide when your employees are going on holiday.

[00:05:28] However, common approach, obviously, would be to agree with the employees on who takes holiday when. If you need to instruct any employees to take holiday, you have a time, you need to inform them in advance, with a two month notice period. And that's not very common to do. The most common approach would, as I said, be to agree with the employees on when they are taking their holiday.

[00:05:56] So that's a high level bird's perspective on what you can hear is a very complicated and somewhat confusing topic. But I still hope that you have been able to take some of this away and know a little bit more of how holiday is practiced in Norway. And so hope you've enjoyed it and listen in to our next episode of Norwegian Employment Law in 10 minutes.